Nobody downloaded yet

Economic Theories - Essay Example

Comments (0) Cite this document
Summary
Economist Jean Baptiste Say of France propounded his Law of Markets in his book "Traite'd'Economie Politique" published in 1803. This law is explained in Book I, chapter XV, "Of the Demand or Market for Products." Today the law is taught is a fallacy of classical economics…
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER93.5% of users find it useful
Economic Theories
Read TextPreview

Extract of sample "Economic Theories"

Download file to see previous pages Keynes was the one who completely refuted Say's Law, so much so that he said that the opposite of the law was actually the truth. In this paper we will analyze the criticisms of all these three major economists in comparison with each other.
J.B.Say believed that production causes consumption, that is, production is the main source of consumption. What, and how much a person demands depended on the income produced by their own acts of production. Say says that a person pays for goods and services through goods and services. This means that the demand for a commodity is a function of the supply of other commodities. Say's Law of Markets explains the process through which supplies in general are converted into demands in general. Say found that supply will be equal to the demand for other goods. For him, since demand results from the production of products, so there can never be excess supply over demand.
Thus, Say believes that there cannot be general overproduction in an economy. He did say that it was possible to have a surplus or shortage of a particular commodity, but these gluts of production were not a result of general overproduction, but instead they were a result of overproduction of a certain good in comparison with other goods which were under produced. So he accepted that there could be short term gluts in an economy, but that it will right itself automatically through the mechanism of prices. He wrote in his "Treatise on Political Economy":
"Garnier, in the notes he joins to his excellent translation of Adam Smith, says that in the old nations of Europe, where capital has accumulated for centuries, a superabundance of annual product would be an obstruction to circulation were it not absorbed by a proportionate consumption. I can see that circulation can be obstructed by superabundance of certain products, but that can only be a passing evil, for people will soon cease to engage in a line of production whose products exceed the need for them and lose their value, and they will turn to the production of goods more in demand. But I do not see how the products of a nation in general can ever be too abundant, for each such product provides the means for purchasing another." (Translated by Palmer 1997, p.76, Cottrell 1997, p.2)
Thus, Say implies that an adjustment in production, prices or marketing strategies would lead to the removal of disequilibrium - arising from overproduction in a particular type of product - in a free market economy. This is the basic proposition of Say's Law of Markets.
Say also believed that savings are beneficial for the economy and are a means of future growth. So they are even better than consumption. He said that savings are led immediately into investments in pursuit of profits, so there would be no deficiency of income, production or consumption. This means that income is always spent either on satisfying current wants through consumption or satisfying future wants through savings accumulation. Hence the market would automatically return to equilibrium even if some income is not devoted to consumption but rather goes to investment. So, general under consumption, just like general over production of a product was not possible, ever. He made an implicit assumption that prices and wages should be flexible. (Anderson) For him money was only a medium of exchange and not a store of wealth. As an inference, Say denounced government interference with the pricing ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Economic Theories Essay Example | Topics and Well Written Essays - 2250 words”, n.d.)
Economic Theories Essay Example | Topics and Well Written Essays - 2250 words. Retrieved from https://studentshare.org/miscellaneous/1529303-economic-theories
(Economic Theories Essay Example | Topics and Well Written Essays - 2250 Words)
Economic Theories Essay Example | Topics and Well Written Essays - 2250 Words. https://studentshare.org/miscellaneous/1529303-economic-theories.
“Economic Theories Essay Example | Topics and Well Written Essays - 2250 Words”, n.d. https://studentshare.org/miscellaneous/1529303-economic-theories.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document

CHECK THESE SAMPLES OF Economic Theories

Economic Theories and the Music Industry

...?Economic Theories and the Music Industry XXXXXXXXX XXXXXXXX XXXXXXXX XXXXXXXX XXXXXXX The music industryis one of the most advanced sectors in numerous fields for the high role that it plays in the life of many. Music has been used ever since age old times to assist in the expression of emotions that a person may bear. Another role that music has played is in the relaying of information that affects the society in a particular manner. There is also the vast use of music for entertainment and pure relaxation. Musicians have made a living out of selling their music formats and thus the identification of the importance of the industry. However, of contemporary times, the sales of music formats have fallen...
8 Pages(2000 words)Essay

Adam Smith and Karl Marx Economic Theories

...? Topic: Lecturer: Presentation: Introduction Economic deals with study of human nature hence most theories ineconomic are based on the nature of humans. Adam Smith and Karl Marx are considered as the greatest economists of their time, in fact Smith is regarded as the father of modern economics (Skousen, 3). Most of the theories in economics today are based on the ideas of Smith as well as Marx and Keynes. These individuals have different ideas on how the economy works and the best economic system that would ensure the good of all people in the society. They also differ on the role the government is supposed to take to drive the economy...
4 Pages(1000 words)Essay

Economic Theories of Adam Smith

...? Economic Theories of Adam Smith Economic Theories of Adam Smith Introduction Economics in general can be defined as a social science concerned with allocation of resources among competing users in the society (Lipsey & Chrystal, 2011). Productive resources are scarce as they do not exist in a sufficient quantity to satisfy human wants. The scarcity imposes a variety of constraints on both the choices of the society and the opportunities open to members. Economists, therefore, examine the activities of consumers, producers, suppliers of resources and the actions of the government in an attempt to examine how resources will be allocated efficiently. This...
5 Pages(1250 words)Research Paper

Adam Smiths economic theories

...?Adam Smith’s economic theories According to some ical economists the most important economic factors are capital accumulation and growth, and this concept has originated from Adam Smith’s Nature and Causes of the Wealth of Nations. In his book, Smith has argued that it is the interaction between various economic forces that is responsible for the dynamic progress of economic system in a nation. Smith has emphasized that a historical perspective is necessary to study the science of man and society, and only with this study it is possible to establish an efficient social science system. He has said that in any society it is the collective contribution of...
5 Pages(1250 words)Research Paper

Economic Theories. Explain the key theories of Adam Smith relating to the free market the 'invisible hand' non-intervention

...?Economic theories Adam smith and the concept of free markets Adam Smith argued that in free market, there are many sellers and buyers and there no one cares about their personal staffs. All they care in the free market is about the prices, sales, and the goods that have been sold. Moreover, the important things in the free market is the different types of free market philosophy which include the concept of unrestricted free market philosophy, and the competitive free market philosophy. The Philosophy of the unrestricted free market means that the market of the goods does not need permissions of importations from other parties even from the ministry of the commerce. In addition, the philosophy of the...
4 Pages(1000 words)Essay

Economic Theories

...? Economic Theory Economic Theory a) How Ricardo Criticized and refined Smith’s Theory ical economic theories are believed to have begun with Adam Smith’s The Wealth of Nations in 1776. Adam Smith’s works were so influential in the 18th and early 19th century, before a group of other classical and neoclassical economic theorists, led by David Ricardo emerged to modify Smith’s theories. Adam Smith is regarded as the father of modern economics, following his treatise, ‘the wealth of nations’ (Derek, & Steven, 2003). He developed his theory at a time when...
3 Pages(750 words)Essay

Macroeconomics- comparing classical economic theories and keynesian economic theories

...A Comparison between ical and Keynesian Economic Theories Introduction Economic theories have been developed over the years on the basis of thechanges in the economies and circumstances in the economy. These theories have been bifurcated into various categories such as classical, neo-classical, Keynesian and so on. Classical economic theories refer to those theories and beliefs that have been propounded by experts in the 18th and 19th centuries (Peet, 2009). Keynesian economists represent those economists who support and advocate the work of John Maynard Keynes. Majority of Keynes’s work happened during...
3 Pages(750 words)Essay

Economic Theories

...Economic Theories Economic theories are important to our society as these depict the exact living conditions of the people, the manner in which they interact with the different yet significant factors and elements that are present and the essential basis of gaining the finances from the public and private domains. Thus the basis of gaining a good insight into these economic theories comes from the way the people conduct themselves in line with the ethical codes, moral procedures, legal obligations and so on, that are generally governed by any society. A case in point is the distribution of the most basic needs for the sake of the people and the way in which these are deemed as sufficient or not from the general standpoint... . The...
1 Pages(250 words)Essay

Using Economic Theories to Analysis a Company

...from the competitors now. Its marketing strategies are believed to be ineffective compared to that of the competitors’. This report analyses the effectiveness of Apple Inc.’s marketing strategies in recent times with the help of its 2013 annual report. Table of Contents Executive Summary 2 1.0 Introduction 4 1.1 Introduction the report 4 1.2 Introduction the report 4 1.3 Introduction the report 5 1.4 Data collection methods 5 2.0 Case study of Apple Inc. based on different economic theories 6 2.1 Endogenous theory 6 2.2 The AD-AS or aggregate demand- aggregate supply model 8 3.0 Conclusions 10 References 11 Appendix 12 1.1 Introduction 1.1 Introduction to the report The recent recession...
10 Pages(2500 words)Essay

Using Economic Theories to Analysis Apple Inc

...Economic Analysis of Apple Inc Contents Introduction 3 Rational of the Study 3 Research Aim 3 Research Objectives 4 Company Profile 4 Data Collection Process 5 Economic Theories 5 Economic Application Analysis 9 Recommendations 19 Conclusion 20 Reference List 21 Introduction The state of business affairs has become highly competitive and complex in the contemporary era. At this juncture, firms need to analyze their market position and commercial success in terms of subjective theories. Apart from the theories of strategic management and marketing, commercial proficiency of a contemporary business firm can be judged in terms of...
10 Pages(2500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.

Let us find you another Essay on topic Economic Theories for FREE!

Contact Us